Editor's note: An earlier version of this report mischaracterized the status of the Energy Department’s agreement with Alcoa. The deal is a conditional commitment, and additional steps are required before Alcoa receives the funding.
WASHINGTON -- The U.S. Department of Energy has offered a conditional commitment to lend Alcoa Inc. $259 million to expand automotive aluminum sheet production capacity at the supplier’s Tennessee factory, reviving a long-dormant loan program to support the development of energy-efficient vehicles.
The funds will finance most of the costs of a $275 million expansion project already under way at the plant, where Alcoa is converting capacity previously used for making aluminum cans to produce high-strength aluminum for automakers. The project began in 2013 and is expected to add 200 permanent jobs after its mid-2015 completion, plus an additional 400 jobs during peak construction, the company and the DOE said.
Final approval of the $259 million loan is subject to completion of additional terms set out in the agreement.
Automotive News first reported the DOE’s interest in Alcoa last May.
“Alcoa’s innovative, high-strength aluminum solutions are leading the light-weighting revolution now happening in the automotive industry,” Alcoa CEO Klaus Kleinfeld said in a statement. “Alcoa is pleased to be part of the government’s program to encourage a greater shift to aluminum-intensive vehicles that are safer, lighter and more fuel-efficient.”
The Alcoa deal marks the first loan agreement made under the Energy Department’s Advanced Technology Vehicles Manufacturing program since 2011.
Under the ATVM program, created by Congress in 2007, the agency lent more than $8 billion to Ford, Nissan, Tesla and Fisker, but automakers’ interest in the low-cost government funds faded in later years amid growing availability of private capital and the controversy surrounding the high-profile bankruptcy and collapse of Fisker Automotive, which won a $529 million loan commitment under the program. Fisker received only $192 million of that amount; the agency froze the remainder after the company failed to hit performance milestones prior to its unraveling.
To revive interest in the fund, U.S. Energy Secretary Ernest Moniz revised the program last year to be more supplier-friendly and met with supplier executives to spread the word that some $16 billion in lending authority was still available.
“We’re very excited to get this money out to aid the industry,” said Peter Davidson, executive director of the DOE’s Loan Programs Office, which oversees the ATVM program. “It is low-cost government financing to encourage domestic manufacturing of fuel-efficient vehicles and the components going into those vehicles.”
Davidson says the effort has paid off and that the DOE is working on more loan applications now than at any time in the past four years.
“We’re seeing a great number of other applicants who have also come in and are now working their way through the program,” he said. “Where we really see opportunity now based on the applications we see is in the area of light-weighting.”